Personally, I think Microsoft needs to make the strategic "pivot" to selling experiences - not necessarily operating systems.
They've done a great job of this with Xbox and Windows 7. I was incredibly sad when the Courier got cancelled. This was a big head pound moment for me. At it's core, MS sells software, but increasingly, it seems apparent that consumers are going to spend their dollars on hardware/software combos (this is primarily a nod to Apple, but look at the care that Google invested with Android - the G1, the close relationship to Droid, and Nexus One, and RIM making all their devices). It's no longer enough to say "here's an operating system, do what you want with it." This was the previous mobile strategy, and now it's gotten them into the position their in.
Mobile seems to be figured out already - MS will be fighting for 3rd place (at least for the next 5-7 years). Tablets is still a potential area for innovation - the iPad leaves a lot to be desired, ChromeOS seems to be dead, Android Tablets have yet to really take off.
Overall - there seems to be an inherent political culture at MS. It's intriguing that Apple has a higher market value with 10% of the employees. I know so many brilliant, smart people that work at Microsoft, but I haven't heard from them in the past 5 years - they seem to all be cogs in a big machine.
Encourage employees to start their own companies. Maybe have a blanket policy of providing seed money to any employee that wants to - YC style. Take a lot of smaller risks instead of few big ones. Zuckerberg would have taken $10,000 for 10% when he first started - now 1.6% cost you $240,000,000! You could have invested in 200,000 ideas for that price. Let your people run with their own ideas, without having to sit through 80 million meetings and having their ideas suffer death by 1000 PM's.